PN CRTC 2014 – 190: Phase 3 – Let’s Talk TV

Jun 27, 2014

Mr. John Traversy Secretary-General CRTC Ottawa, ON K1A 0N2

Dear Mr. Traversy:

Enclosed is FRIENDS’ submission.

Also submitted as separate .pdf files are two studies co-funded by FRIENDS and other parties, one an Environmental Scan and the second on the Rights market, both authored by Peter H. Miller. These should be considered as appendices to FRIENDS’ submission.

Friends wishes to appear at the Public Hearing in order to discuss its views with Commissioners.

Yours sincerely,

Spokesperson

Broadcasting Notice of Consultation CRTC 2014-190

Phase 3 – Let’s Talk TV

Friends of Canadian Broadcasting is an independent watchdog for Canadian programming, primarily in the English‐language broadcasting system, supported by 235,000 Canadian families, and is not affiliated with any broadcaster or political party. Friendsaskstoappearattheforthcomingpublichearing in order discuss with the Commission our views on the future of television in Canada, as outline herein.

The Canadian Broadcasting System in Transition (Executive Summary)

Scope and Outcomes of This Proceeding

What Canadians Value in Their Broadcasting System

What’s at Risk in the Canadian Broadcasting System?

Simultaneous Substitution

Unbundling

Other Risks to the System

Supporting Key Priorities of the Canadian Broadcasting System

Ensuring an Optimum Regulatory Framework for the Private Elements of the System

1. The Canadian Broadcasting System in Transition (Executive Summary)

1. Friends of Canadian Broadcasting (Friends) comes to this proceeding with four fundamental perspectives:

That the Canadian broadcasting system is and can remain a core element of Canadians’ sense of local and national identity, and Canada’s place in the world;

That cultural policy objectives need to be taken into account alongside the economic interests of both the industry and consumers;

That, as protective regulatory measures become less effective, and direct government subsidy a scarce commodity, the system must focus on key priorities as well as means for their delivery; and

That, as the system is challenged, and private elements of the system are less able to contribute, the role of the CBC/SRC increases in importance.

2. The current Television Regulatory framework has developed over several decades to balance the objectives of the Broadcasting Act – taking into account the broad array of foreign services and programming that Canadians enjoy daily – and the interests of Canadian broadcasters themselves. It would be irresponsible, bordering on foolish to abandon tools developed over several decades to achieve this balance. Yet this possibility seems clearly on the table. It would, of course, be equally foolish to advocate that nothing needs to change.

3. In our view, there is no need to change fundamentally the current regulatory framework for at least three, if not five years. To do so would undermine a system that works and can continue to work, at least over the short-to medium-term.

Introduce some targeted measures to provide more support for Canadian programming – particularly local programming, and

Recalibrate the expectations of the private and public components of the system, emphasizing the contribution of public broadcasting.

5. These three themes are inter-related. Friends believes strongly that the single best way to strengthen the CBC/SRC is to reduce or eliminate its dependence on advertising (in particular on English Television). Removing this ‘subsidized competition’ creates an effective and attractive quid pro quo for leveraging the system as a whole (primarily BDUs and "over-the-top" television [OTT1] services) to provide additional resources to finance the national public broadcaster.

6. These funds should be sufficient to enable the CBC to (a) offset the loss of commercial revenue; and (b) resume its role as the principal provider of truly distinctive Canadian programming. We define ‘distinctive’ Canadian programming as programming that is ‘culturally’ Canadian (i.e. tells uniquely and recognizably Canadian stories or focuses a uniquely Canadian lens on the world) rather than merely ‘industrially’ Canadian (i.e shot in Canada or using some arbitrary proportion of Canadian resources).

7. Accordingly, this intervention is divided into the following sections:

What do Canadians value and continue to want to see from their Canadian broadcasting system?

What is at risk vs. possibly enhanced by digital technology and the Internet?

What are the key priorities that the broadcasting system should continue to support?

How do we recalibrate the architecture and design of the system to free up private broadcasters to compete profitably, and strengthen and renew the CBC/SRC? In particular:

What should the private elements of the system do, and how should the regulatory framework support this?

How can non-traditional Internet-based OTT contribute?

What should the public elements, and in particular, the CBC/SRC, do? And how can sufficient resources be allocated to this end?

2. Scope and Outcomes of This Proceeding

8. The Commission has defined this proceeding as being about “the future of TV”. Surprisingly, for this headline, while many fundamental elements of the historic broadcast regulatory framework are on the table (including simultaneous substitution and Canadian content exhibition requirements), two critical elements are not even mentioned: CBC/SRC and over-the-top television services (OTT). That the Commission apparently considers it possible to conduct a genuine review of “the future of TV” in 2014 without debating such topical matters as the role and funding of the CBC/SRC and the appropriate contribution of OTT and other Internet players (raised in the CRTC Choicebook) is, quite frankly, startling – even shocking. In short, Friends respectfully suggests that the scope of this proceeding is at once insufficiently comprehensive in some essential respects – the role of CBC/SRC and of OTT; and overly broad in others – the extent of regulatory ‘reform’ (dismantling), which is, at least, contemplated.

9. A review of landmark CRTC policy proceedings held over the past twenty years that examined future regulatory frameworks for the broadcasting system suggests that even if broad in title, they were less ambitious in scope:

1993 Structural hearing2

1999 TV Policy3

2006 Digital Migration Framework4

2010 TV Group Licensing Policy5

10. The only occasion when the Commission has looked at “the future of TV” more generally (at least, in recent memory) was the 2006 Section 7 report to the government on The Future Environment Facing the Canadian Broadcasting System.

11. None of the Commission’s past broadcast regulatory policy hearings appear to have attempted – as this proceeding apparently does – to look at the entirety of TV regulation (distribution, conventional, specialty, pay, PPV and VOD broadcasting) all at the same time. Historically, the Commission may have recognized that attempting to do so carries the risk of getting too much terribly wrong, at the expense of listeners and viewers.

12. At a minimum, this suggests that – in contrast to the framing in the Notice ­– the Commission should approach the notion of change to current regulatory frameworks with caution. The default should be a bias in favour of retaining and fine-tuning, rather than abolition. The ‘do no harm’ principle comes to mind.

13. This suggests that the Commission should narrow the scope of the current policy proceeding to one key regulatory framework – perhaps to private TV (as in the 1999 policy) or distribution (as in the 1993 Structural hearing), rather than dealing with all areas concurrently.

14. On balance, Friends believes that the scope should remain broad, and the outputs defined in discrete, manageable ways.

15. Consistent with the Commission’s history, and the scope of issues that cry out for debate in a holistic and realistic manner, Friends proposes that the Commission do the following:

16 First, recognize that any regulatory framework that arises from this proceeding could, at best, have a sunset of three, possibly five years. This proceeding may usefully put in place some new measures for the longer term, but it should not remove obligations on the hunch that they might become unsustainable three to five years hence. Some broad measures may reasonably be determined in this proceeding. Others will require further, more focused proceedings in future years.

17. Second, the Commission should, following this proceeding, commence a review of the New Media Exemption Order. As is further discussed below, and evidenced by the Environmental Scan commissioned by Friends and other interested parties6, the notion that new media (including OTT) are merely complementary and do not pose a threat to traditional broadcasting licensees' ability to meet their obligations is no longer tenable. As a result, Friends submits that the CRTC is legally obliged to revisit the New Media Exemption Order and determine what contributions pursuant to the Broadcasting Act would be appropriate for OTT services and other Internet-based TV players.

18. Third, the Commission should, also following this proceeding, start a separate process to prepare a report to government, under the CRTC’s own initiative, on the ‘future of TV’. Such a report would update the Commission’s 2006 report, and make appropriate recommendations. In that vein, Friends urges the Commission to ask government to:

Provide the CBC/SRC with predictable and sustainable funding sufficient to carry out its statutory mandate as the national public broadcaster; and

19. The Commission is in a position to take many important steps stemming from this proceeding, including support for local programming, directing a portion of BDU Canadian programming contributions to CBC/SRC, and ensuring a reasonable contribution from OTT services.

20. In the longer term, government must ensure that Canadians can rely on a CBC/SRC that is properly funded for the future, and a system that draws support from an appropriately broad range of Internet players.

3. What Canadians Value in Their Broadcasting System

21. There is a lot to admire in the Canadian broadcasting system – choice, diversity of programming, local information and reflection, a sense of national identity and a Canadian window on the world. There are at least eight dimensions to this:

Economic. The Canadian television system directly generates $15.2 billion in revenues annually and supports 66,000 jobs7. The television system is also part of a broader film and TV ecosystem in Canada that supports an estimated 260,000 full-time equivalent workers (FTEs), and generates $13 billion in labour income for Canadians and $20 billion in GDP for the Canadian economy.8

Canadian programming. Consistent with trends around the world, Canadian programming has never been stronger. Canadian drama has had major success at home and abroad – Republic of Doyle, Orphan Black, Rookie Blue, Heartland, to name but a few. Innovation and new formats have kept Canadians entertained and informed about their country and with their sensibilities as never before – from Rick Mercer and Dragon's Den and Tout le monde en parle on CBC/SRC to MasterChef Canada, Canadian Idol, So You Think You Can Dance Canada and Star Académie on private broadcasters.

Local reflection. Canada’s local TV stations produce thousands of hours of local news and information programming every week. These programs remain popular with Canadians across the land, and in times of crisis or concern, these stations are a vital link for local residents.

Choice and value. Canadians enjoy more choice at equal or lower cost than their neighbours to the south. They receive virtually all quality U.S. TV programming, plus an almost equal amount of quality Canadian content.

Access. Through such measures as closed captioning and descriptive video, Canadian broadcasters engage Canadians who might not otherwise be able to enjoy TV.

Diversity. English- and French-language programming is now complemented by an array of aboriginal and third-language programming and services. Indeed today, about half of specialty services offer third-language programming.

Affection. Canadians take pride in their broadcasting system. They know that, like our country itself, it exists as an act of political will.

Patriotism. The broadcasting system supports a distinct country on the northern half of the North American continent – and Canadians don’t want to lose that.9

22. Not all Canadians are familiar with the CRTC, and still fewer are familiar with the Broadcasting Act, but a vast majority support the objectives identified in the Act and expect the CRTC to implement reasonable measures to advance those objectives.10

23. Over six decades of evolution, the Canadian television system has vastly improved in most areas, while becoming more fragile in others. Quality, choice, convenience, cultural and genre diversity have all massively increased. Ownership diversity and local programming have, by contrast, decreased. In some cases – such as local news and community information –new media alternatives have started to supplement or replace them; in others such as ownership diversity, there have been huge losses. On balance, however, most Canadians would probably agree that TV has never been better.

24. Looking back over the past 15 years (since the CRTC’s 1999 TV policy “Building on Success”) it is hard not to notice the magnitude of change, including:

Loss of independent ownership. In 1999, CanWest, WIC, Baton, CHUM, and Craig Broadcast Systems were all independent conventional TV groups. Alliance Atlantis and NetStar Communications were major independent specialty groups. Today, the vast majority of English- and French-language specialty and major market local TV are owned by four broadcast groups, which are in turn owned by vertically-integrated communications players.

Rollout of digital. In 1999, digital cable penetration was below 15%11. Today it is close to 100%. In 1999 few, if any services were available in HD. Today, virtually all are, and discussion is starting to turn to 4K12 as the next-generation TV format.

Emergence of vibrant telco/BDU competition. Major telcos did not start to launch IPTV service until 2005 (Telus). IPTV experienced 52.5% cumulative annual aggregate growth (CAGR) from 2008 to 2012, was at 6.7% penetration in 2012 and is over 10% today.13

Broadband. Neither broadband nor mobile Internet existed in 1999. By 2012, 75% of Canadians were using broadband and over 50% had access to the Internet on their mobile devices. These technologies have spawned a burgeoning market for new, and ‘re-purposed’ content forms, including:

Programming rights. By 1999, program rights had shifted from being purchased on a market–by–market or regional basis to being purchased nationally. A typical sale for over-the-air television (OTA) provided for one run and a repeat. Specialty rights used to be sold separately, at best with a defined number of ‘play days’. Today, program rights typically include multiple platforms and multiple plays including ‘catch-up’ and in-season ‘stacking’ rights. U.S. OTT services, such as Netflix, are also buying Canadian rights14.

Shifts in advertising. In 2000, television had $2,454 million in advertising revenue; radio had $1,001 million and the Internet was at $110 million, out of a total advertising pie of $7,214 million15. In 2012, television had $3,476 in advertising revenue; radio had $1,585 million and the Internet had grown to $3,085 million, out of a total advertising pie of over $11,215 million.16

Shifts in technology. In 1999, approximately half of Canadian households had a PC; there were no tablets, no smartphones and downloading of movies or TV programs was statistically insignificant17.

Growth in the system. At the turn of the century, the television system had revenues of less than $10 billion.18 In 2013, the television system (CBC/SRC, private stations and BDUs) had revenues of $16 billion19.

25. In looking forward, the Commission noted wisely in 1999 that “Given the scope, complexity and pace of change, it is difficult to predict the exact nature of those changes and how and when they may have an impact.” These words still apply.

26. In its 1999 TV Policy, the Commission also identified a number of “indicators of success” for private TV. It is instructive to compare them selectively to today’s equivalents:

1997 PBIT (profit before interest and taxes) margin stood at 15.6% for conventional television and at 17.4% for pay and specialty television. In 2013, average PBIT for conventional TV had fallen to -0.1%20, and for pay and specialty television had risen to 26.5%21.

Viewing of English-language Canadian programs, as a percentage of all viewing of English-language television, stood at 33% in 1997 (up from 27% in 1992), and as at 2012, reached 38.5%22.

1997: Traders broadcast by Global, The City and Cold Squad broadcast by CTV, Emily of New Moon23 broadcast by WIC and CBC and Les Machos broadcast by TVA attracted between 600,000 and one million viewers on English stations and over one million viewers on French stations. Today’s Rookie Blue, on Global, draws 1.2 million Canadian viewers, while CTV’s Saving Hope draws over 1.3 million. Also significant, both shows run on U.S. networks, drawing seven and three million plus viewers respectively.

27. Other than conventional TV, by these financial metrics, English-language private Canadian television is out-performing its 1999 self on every count.

28. As reflected in the CRTC’s own research, Canadians are largely satisfied with Canadian television. If there is one complaint, it is the price that Canadians have to pay for their TV. In fact, while two-thirds (67%) are satisfied with customer service and find Canadian programming in general, comedy and feature films important (62% each), half value local programming (53%), drama (51%), music (50%) and programs that portray Canadian diversity (48%) and are satisfied with flexibility in selecting (50%) channels. Only 36% are happy with the cost of their service. Considering the formulation of this latter question, who would expect otherwise?

29. CRTC-commissioned research confirms that the vast majority (78%) of Canadians pay for a subscription to a television service, with only 5% opting for free OTA television and 14% indicating they do not have a paid subscription24.

30. Since the CRTC’s relaxation of rate regulation among cable BDUs in 2002, big-cable has increased its monthly rates for ‘basic’ by approximately four times the rate of inflation: Shaw from $22 to $40; Rogers $23 to $43; and Vidéotron $19 to $37. The term ‘gouging’ appears insufficient to describe this increase.

31. Despite this ‘heist’, Canadians still see their television system as providing valued and cost-effective information and entertainment compared to other alternatives. This is a strong foundation for the future.

4. What’s at Risk in the Canadian Broadcasting System?

32. Over several decades the Canadian broadcasting system has flourished by carefully ensuring that new initiatives fit with existing regulations so as to minimize the danger of unintended consequences. Wholesale gutting of many of these regulations could result in catastrophic impact on the entire broadcasting system. We therefore urge the Commission to exercise extreme caution when making changes to a system which is, in large measure, not only fulfilling the requirements of the Broadcasting Act, but is also working well for all stakeholders. Of course, there are many factors, some technological, which require regulatory change to ensure ongoing balance in the system.

33. Perceived or regulatory risks include the Commission’s flirtation with pick-and-pay and the termination of simulcast. There is simply no compelling public policy reason to make these changes. While cloaked in ‘consumer-driven’ language, it is evident that the reason the CRTC is looking at pick-and-pay is to fall in line with the Harper Government’s bidding. For the most part, the Commission’s evidence of a negative impact of simulcast seems to be limited to sporting events, in particular the Super Bowl –­ definitely not a sufficient reason to destroy an instrument that contributes one-third of a billion dollars each year to the broadcasting system. Its withdrawal would also deliver a huge, unsolicited gift to U.S. border stations. Both these proposals constitute an over-reaction to normal consumer dissatisfaction with regulatory measures that, at worst, cause minor inconvenience – akin to ‘traffic lights’ at an intersection.

Simultaneous Substitution

34. First introduced in 1972, simultaneous substitution was designed by the Commission to protect rights purchased by Canadian broadcasters, while avoiding black-outs (a scourge of U.S. rights protection from a viewer’s perspective).25 Simulcast remains an important means by which the broadcasting system generates revenues/profits from U.S. programming that would, in any case, be watched by Canadian viewers. The termination of simulcast, by making it impossible for Canadian broadcasters to enforce the territorial rights they have purchased, would jeopardize the historic business model of investing profits from airing U.S. programming to subsidize Canadian programs, and with them, the viability of many local TV stations across the country, especially in smaller markets. It would also jeopardize the existence of a separate Canadian rights market – which would not be in the interest of creators and rights-holders.

35. According to the Environmental Scan, the total annual revenue bump to the system from simulcast is approximately $300 million (approximately 15% of private OTA TV revenues). Needless to say, a revenue reduction of this magnitude, in a sector already experiencing declining revenues, and without profit, could not be sustained without major repercussions – including station closures and lower production values.

36. A likely outcome would be the closure of a number of small-market independent TV stations and the CTV 2 Network, including its medium-market stations in London, Ottawa, Barrie and Victoria (once its acquisition-based regulated continuance ends). In its 2011 group renewal, Bell cited the challenges facing this group of stations, and would guarantee their operation only for a limited number of years. A fundamental change in the regulatory environment, such as the loss of simulcast, would almost certainly provoke that decision – as it would for many smaller local TV stations, already severely hit from the recent termination of the LPIF. The Commission would justifiably be held responsible for the surrendering of multiple licences that provide valuable services to Canadians in disadvantaged, vulnerable markets.

37. The elimination of simulcast is a bad idea that should not be given serious consideration. Complaints about Super Bowl ads would pale in comparison with the complaints from Canadians in small- and medium-sized communities affected by the station closures that would follow directly from simulcast’s demise.

Unbundling

38. It is worth noting that nothing requires the CRTC to introduce pick-and-pay. Even the Harper Government’s Throne Speech, which launched this debate in Canada, stated: “Our government believes Canadian families should be able to choose the combination of television channels they want. It will require channels to be unbundled while protecting Canadian jobs.”

39. Unbundling does not mean mandatory individual pick-and-pay. It does not require abandoning a predominance of Canadian services. To the extent that the Commission wishes to follow the government’s “Direction”, this could be accomplished without derogating from core regulatory principles. And if not, the Commission should decline to proceed on the grounds that it cannot be done “while protecting Canadian jobs”.

40. As outlined in the Environmental Scan, estimates of the impact of pick-and-pay vary, but some U.S. studies suggest an impact as high as a 50% loss of revenues. Even at the Scan’s more conservative 20% impact on subscription revenues, these are not the kinds of gambles a prudent CRTC would take with the future of the Canadian broadcasting system.

41. It is also clear that there are varying levels of consumer understanding and expectation around pick-and-pay that have not been clarified by the Commission’s recent flirtation with the idea. Those few Canadians following the formal review process would be aware that some kind of basic service would still be required. Unfortunately, Friends considers that the much-larger majority anticipate that, with pick-and-pay, the viewer would be able to purchase only the channels that s/he wants to pay for (including a package comprised exclusively U.S. services) and will not have to pay for any of the stations that are currently received as part of the basic package. They could also come to the erroneous conclusion that, because of this reduction in the number of channels that are purchased, the overall cost for their services would go down.26

42. In reality, the Commission has made it clear that it would still require a basic package of the same services that many Canadians apparently claim they do not want to pay for, so that they would still have to pay for them. And (unless the Commission were to abandon the notion of predominance of Canadian services, which would be illegal) Canadians would still have to pick Canadian channels paired with U.S. channels. Moreover, economic principles suggest that if everyone had the option of picking fewer channels, the per-channel cost would rise.

43. How would any of these proposals make the system stronger or create more and better Canadian programming? None of this would further the objectives of the Broadcasting Act.

44. It is essential that the Commission study the options carefully in order to avoid harming our fragile and carefully-constructed broadcasting ecosystem. Adopting an ill-conceived, focus group-generated change would do a disservice to all Canadians.

Other Risks to the System

45. Risks to the system include major shifts in technology, consumer habits, advertising and subscription revenue, all of which could profoundly affect television.

46. The Environmental Scan, attached as Appendix 3, was commissioned by Friends, among others, in order to understand better these risks and trends. This report concludes that, as substantial as these threats are, they will cause no substantive diminution in the system’s revenues nor its capacity to support Canadian programming and other objectives of the Broadcasting Act for at least three, if not five years.

47. Moreover, a companion study on the State of the Canadian Program Rights Market (Appendix 2) suggests that there is a strong likelihood that the Canadian broadcasting system can continue to survive and flourish in the face of a growing OTT sector as long as Canada is able to maintain a separate rights market for TV programming. As the study states:

The ability of Canadians to bypass Canadian broadcasters through a Canadian Netflix, a grey-market subscription to Hulu or a pirate aggregator like Popcorn Time does not in and of itself render the Canadian broadcasting system “game over”. The Canadian broadcasting system has always had the potential for bypass – from the fully 100% bypass in favour of U.S. OTA broadcasters that the system was founded to correct, to the 10% bypass to foreign ‘death star’ grey-market DTH operators of the late 90s and early 00s. The key to the Canadian broadcasting system has never been in “preventing” bypass, but in creating compelling, viable Canadian alternatives that the majority of Canadians are content to watch.

48. While it is apparent that certain parts of the system, particularly conventional television and CBC English Television, are suffering, overall the Canadian television system remains strong. Indeed, even if the Commission were to change nothing as a result of this proceeding, the sector would likely have a similar economic profile in three to five years: $15.2 billion in annual revenue and 66,000 jobs27.

49. This suggests that there is no need at this time to systematically unwind or demolish the fundamental regulatory underpinnings of the Canadian television system. Therefore, the Commission needs to take care to avoid over-simplification of arguments, so-called easy solutions and, most of all, unintended consequences. Therefore, the Commission should:

Employ a light hand in continuing to ‘tweak’ (or improve) its regulatory frameworks to give greater flexibility to industry players where warranted, and focus on core regulatory objectives (such as quality over quantity); and

Initiate a process to determine a mid-term regulatory framework that builds a stronger CBC/SRC within a sustainable Canadian broadcasting system, consistent with the objectives of the Broadcasting Act.

5. Supporting Key Priorities of the Canadian Broadcasting System

50. Enacted in 1991, Canada’s Broadcasting Act contains policies that have been substantially consistent since 1968. The Act has stood the test of time. This is a testament to the ability of legislative drafters to create a mostly ‘technology neutral’ piece of legislation that nevertheless addresses the core values that Canadians hold vis-à-vis their local, national, and international English, French, aboriginal and third-language audio-visual media28.

51. While the last few years have seen various calls for revising or updating the Act, such comments have been somewhat vague when it comes to what needs to change29.

52. All law-abiding people should therefore share Friends’ view that, unless and until it is amended by Parliament, the Broadcasting Act should be upheld and applied with vigour.

53. To do this, Friends suggests a three-part framework for analysis:

Determine the capacity of the system to support Broadcasting Act objectives;

Determine the priority that should be accorded to these objectives, given the system’s capacity and the availability to Canadians of alternative media; and

Determine which players in the system are best suited to meet these objectives, and how.

54. As discussed in Section 4 above, in Friends’ view, the capacity of the system to support Broadcasting Act objectives will remain essentially unchanged for at least the next three years.

55. In Friends’ view, the priority to be accorded the objectives of the Broadcasting Act should not substantially change from what it is today. These objectives include:

Support for Canadian programming, particularly under-represented categories: drama, documentary, children’s and local programming;

Support of diversity in the system; and

Support for the cornerstone place of the CBC/SRC.

56. Among the four categories, local programming and the CBC/SRC are clearly both particularly at risk, while suffering from a dearth of champions in the ‘right places’.

57. The apparent views of the Harper government towards the CBC/SRC are not matched by those of a large majority of Canadians.30

58. Similarly, and as evidenced by Canadians’ input in earlier phases of the CRTC’s ‘Talk TV’ process31, Canadians care about local TV and local programming. Indeed, over ten years of polling done by CMRI (2002 to 2011), there has been a remarkable level of consistency in Canadians’ overall interest in local news.

59. Unfortunately, with the economic woes facing conventional TV, CBC’s budget cuts, the cancellation of the LPIF and the weakening of support measures such as distant signal compensation, local TV and local programming in Canada is on life support. Without CRTC intervention now, in many markets it will likely disappear.

Canadians are increasingly shifting to watching drama and entertainment programming ‘on-demand’ rather than on linear channels. Sports, 24-hour news and event programming remain well-received by Canadians on linear channels.

As breaking news and current weather become readily available from 24-hour channels, online and mobile sources, scheduled ‘suppertime’ and even evening newscasts are less-and-less relevant to many Canadians32.

Social media and myriad ways that communities can connect online have also affected the value of traditional linear community channels.

61. Such shifts suggest a need to assess the degree to which regulatory intervention is or will be either able, or necessary, to advance Broadcasting Act objectives. Using the examples above:

A shift to on-demand viewing clearly reduces the capacity of the system to rely on exhibition quotas as a means of promoting Canadian programming. It does not, however, render exhibition quotas irrelevant.

Shifts in news consumption call into question the merit of maintaining standard weekly local programming obligations on unprofitable local private broadcasters, especially if the alternative is station closure.

The presence of social media and online community connections raise the question of whether some proportion of moneys currently spent on the community channel might be better redirected.33

62. As a general comment, Friends also sees a need and opportunity to shift certain obligations from the private elements of the system to a renewed and revitalized CBC/SRC. As noted above, Canadians have repeatedly demonstrated, in overwhelming numbers, and with remarkable consistency, their support for a strong, independent, well-funded national public broadcaster.34

6. Ensuring an Optimum Regulatory Framework for the Private Elements of the System

63. The private elements of the broadcasting system have demonstrated their ability to provide Canadian programming that Canadians want to watch in a variety of genres – lifestyle, news and sports being among the most successful genres35.

64. Despite a core prime time dominated by U.S. programming, Canadian private broadcasters also make an important contribution to Canadian dramatic programming, with, as previously noted, dramatic series on private television reaching new heights.

65. While admittedly facing economic challenges, in the aggregate (specialty and conventional), private broadcasters do not appear to face the immediate prospect of major revenue declines or the devastation of their entire business model. The vast majority of local broadcast stations are owned by vertically-integrated conglomerates whose interests extend to specialty TV, VOD, BDU, ISP and, in some cases, mobile. As a result, conventional TV losses, in particular, may be sustainable and cross-subsidized in view of financial gains elsewhere36, provided that public policy provides incentives to cross-subsidize.

66. However, other than a specific regulatory requirement that Bell Media continue to own and operate CTV2 stations for five years, there are currently no other requirements to continue to operate unprofitable OTA stations. The Commission should address this regulatory gap in order to safeguard access to local programming in smaller markets.

67. It will be important to continue to draw distinctions between the types of players, as the Commission does currently with its Group Licensing policy:

Independent local TV players have unique and varying challenges. They should continue to be encouraged to provide local reflection, but (especially in light of the phasing out of the LPIF) granted additional support and the flexibility to allow them to do so profitably.

Rogers’ CityTV group has historically been given greater flexibility in licence conditions than the other major groups. The viability of the CTV 2 network, as reflected in Bell’s commitment to guarantee their operation only for a limited number of years, may call for increased flexibility for their medium-market stations in London, Ottawa, Barrie. and Victoria.

68. As a whole, however, Friends does not recommend fundamentally changing the current regulatory framework for private broadcasters, and in particular, recommends:

Maintaining simultaneous substitution;

Not requiring the introduction of pick-and-pay;

Maintaining the current distinction between Category A, B and C services, including the Commission’s approach to group Canadian Programming Expenditures (CPE)37;

(Further details are provided in Friends’ answers to CRTC Questions in Appendix 1.)

69. Friends does not, however, oppose regulatory changes that either do not materially decrease, or actually increase, the ability of an affected sector to contribute to the objectives of the Act. In Friends view, any such changes should also be:

Positive in terms of regulatory ‘future proofing’;

Enhance the sector’s ability to compete and/or generate revenue; and

Be neutral or positive for Canadian viewers.

70. To that end, Friends believes the following new measures merit consideration:

Removal of BDU community-channel funding requirements for cable-operated channels38 with redirection of funds to CBC/SRC and/or local news on independent local TV stations; and

Consideration of removal of local programming requirements for financially-stressed conventional stations in smaller markets, on a case-by-case basis, subject to adequate resources being directed to CBC/SRC to meet such needs.

71 These proposals are described in greater detail below.

Redirecting Community Channel Funding

72 The Commission’s two key objectives in implementing the 2002 community TV framework were:

To ensure the creation and exhibition of locally produced, locally reflective community programming; and

To foster a greater diversity of voices and alternative choices by facilitating new entrants at the local level.

73. In its most recent review of the role of the Community Channel in 2010, the Commission reaffirmed its view that the community channel’s primary role should be public service. The Commission also set a new requirement that at least 50% of community channel programming be devoted to access programs, and that a minimum of 50% of community programming‑related expenditures be devoted to such programming.

74. Even if one accepts that the role and importance of the community channel has not changed with the introduction of the Internet, it is troubling that:

Only 50% of the expenditures cable BDUs allocate to the community channel are directed to the primary public-service obligation of access programs, but

Fully 100% of expenditures are eligible to come out of the 5% BDU contribution.

75. This suggests to Friends that there is good reason and ample opportunity to redirect a proportion of current BDU contributions to more important objectives, without increasing the burden on consumers.

76. At a minimum, Friends would therefore propose that:

Eligible community channel contributions be reduced to 1% of cable BDU contributions; to be directed only to access programs managed arm’s-length from the BDU. The 1% no longer required for this would be re-directed to the CBC (and potentially local programming), an amount equal to approximately $64 million annually; and

DTH be required to match revised cable obligations towards “local expression” by directing a full 1% to local programming. This would bring in an incremental $15 million39. CBC should be permitted to access this new funding for local programming directed to smaller markets across Canada.

Support for Private Conventional TV Local Programming Requirements

77. Local TV, particularly in small markets, is under huge strain. The situation is particularly dire in French-language markets, where concentration of ownership is highest. While the Commission may historically have expressed support for local TV, what it has recently done is:

Cancel the Local Program Improvement Fund (LPIF);

Introduce a negotiation regime for distant signals that is inaccessible to smaller stations, and that replaces previous agreements for distant signal compensation; and

Introduce increased obligations for closed captioning, descriptive video and, in some cases, local programming (seven hours per week for small market stations; fourteen for larger).

78. Clearly, previous Commission decisions have brought the CRTC to a fork in the road. It must either increase its support for smaller-market TV stations so that they can deliver local programming, or take responsibility for the decisions that will inevitably lead to reduced local programming in smaller markets, or station closures.

79. Friends believes that small independent TV stations should receive similar support from cable as they currently receive from satellite. A contribution of as little as 0.2% would go a long way to making up for the Commission’s (unwise) cancellation of LPIF.

80. Some of the smallest-market stations may not be viable on a stand-alone basis ten years from now. But most could be, if the Commission provided them with adequate support in the transition from a predominantly TV-based business model to a new online model.

81. What does not make sense is to ignore changing viewing habits and changing economics. In small- to medium-size markets, it may no longer make sense for local TV stations to provide local news through an exclusive model of suppertime or evening newscasts. Bulletins through the broadcast day and breaking news when it happens could provide a better model for linear broadcast, taking viewers online for in-depth coverage.

82. In that model, leveraging multiple platforms – TV, radio, print, Internet – will make optimal use of limited resources. In that model, in many markets, CBC/SRC could also provide diversity, while playing a material multi-platform role.

Other Regulatory Changes

83 While Friends is not well-placed to make the case for regulatory changes on behalf of private TV, we would be inclined to support reasonable requests as noted in our responses to the CRTC’s questions (Appendix 1).

7. A Fair Contribution From Non-traditional TV Players

84. The CRTC’s early decision to exempt non-traditional IP-based forms of television distribution and exhibition was based on a fundamental and necessary premise, articulated as follows:

The Commission considers that broadcasting in new media creates opportunities for the broadcasting system to better serve Canadians and commends parties for their willingness to embrace the new media environment. Based on the record of the Proceeding, the Commission does not consider that broadcasting in new media currently poses a threat to traditional broadcasting licensees' ability to meet their obligations. In fact, new media is currently being used in a complementary manner by many broadcasters for activities such as providing audiences with the ability to catch up on missed programs, promoting broadcast offerings and building brand loyalty. As such, the Commission is satisfied that broadcasters have the tools to adapt to the challenges posed by technological change and the motivation to incorporate new platforms and formats into their business models40. [emphasis added]

85. As the Environmental Scan makes clear, supported by the submissions of many parties in this process, the notion that new media (or even the more limited OTT) is merely complementary and does not pose a threat to traditional broadcasting licensees' ability to meet their obligations is no longer valid. As a result, Friends submits that the CRTC is legally obliged to revisit the New Media Exemption Order and determine what contributions pursuant to the Broadcasting Act would be appropriate for OTT services and other Internet-based TV players.

86. This does not mean the CRTC must necessarily license such players. As has been determined with, for example, exemption orders for smaller BDUs, the Commission could determine that licensing is not necessary to further the objectives of the Act, and merely add further conditions of exemption. In the past few years, conditions have already been added to exempt new media undertakings regarding undue preference and reporting. Adding conditions requiring some form of contribution would be entirely appropriate, and in Friends view, essential.

87. It is worth noting that Canada is not alone in grappling with the issue of the appropriate role and contribution of foreign OTT services. France has been reportedly negotiating with Netflix on conditions of entry, given pre-existing European 50% exhibition requirements and a 15% French-content expenditure requirement41.

88. According to recent reports, Netflix Canada spends up to 5% of its Canadian revenues on Canadian content. It is not known whether the rights purchased for this sum refer only to Canadian rights or include other territories.

89. BDUs have a 5% contribution requirement. The average CPE expenditure of the private Canadian broadcast groups is 30%.

90. Netflix and similar OTT services operating in Canada (Crackle, Canal+ etc.) and elsewhere are part programmer/part distributor. Therefore a rate somewhere between 5% and 30% would appear appropriate at this time.

91. Friends recommends that a minimum 10% of Canadian revenue contribution requirement be levied on OTT services operating in Canada. This could be directed to a combination of Canadian programming expenditures and third parties such as the CMF and CBC/SRC. Given its importance, Friends recommends that a minimum of 5% of OTT revenues be directed to the CBC/SRC, exclusively for programs of national interest (PNI).

92. Ten percent would be small enough not to make a material competitive difference to such services (Netflix has already announced a price increase in Canada of more than 10%42), but big enough (with growth) to ensure a meaningful contribution.

93. The percentage itself could be evaluated over time, and adjusted as appropriate, taking into account the competitive environment. On projected Netflix revenues, alone, the proposed 5% to third parties could yield $25 million annually by the end of 2015.

94. Friends believes that the majority of Canadians would support mandated contributions from TV-like Internet programmers to Canadian programming as a cost of doing business here.

95. The necessity for this approach stems, in part, from the recent Federal Court decision ruling ultra vires the notion of a direct ISP levy. Friends anticipates that a future government might revisit this, and we will continue to press for broader support from all players in the new Canadian TV value chain, as appropriate.

96. Finally, as noted by Friends in a recent Senate Committee appearance, the notion of extending the fundamental Broadcasting Act principle of "priority carriage" to Internet-based distribution of TV programming needs to be fully explored43.

8. Enhancing the Support and Role of the CBC/SRC

97. As already noted, Friends believes that the role of the CBC/SRC will be more important going forward, for four reasons44:

CBC/SRC is the only large Canada-wide non-vertically integrated entity with the experience and resources necessary to provide programming of public interest across multiple platforms from coast to coast to coast;

As private broadcasters lose their ability to fund and exhibit local news and information programming, CBC/SRC can leverage its combined resources of TV, radio and digital to provide appropriate local content necessary to fill the gap; and

CBC/SRC is a crucial, independent and potentially non-commercial voice, in a sea of foreign and vertically-integrated TV voices in Canada. As Canadians are increasingly inundated by foreign programming on foreign-owned platforms, vehicles like the CBC/SRC provide a rare and essential view of ourselves as a distinct country on the northern half of the North American continent.

As the national public broadcaster, CBC/SRC should be the place where Canadians can turn for programming that is not only “predominantly and distinctively Canadian” (the Broadcasting Act), but also distinctive in its mix of genres, containing, for example, significant amounts of long-form documentary production, arts and culture presentations, ‘edgier’ and challenging drama, etc.45

98. Friends' vision for CBC English Television is that of a much less commercial public broadcaster, sufficiently funded to make a material difference in enhancing Canadians’ sense of local and national identity in an increasingly cluttered and foreign-dominated media landscape.

99. We note the use of the word “compelling” in the Commission’s Hearing Notice vis-à-vis the “intended outcome” of a system that “encourages the creation of compelling and diverse Canadian programming”. This is a good choice of vocabulary. It includes “popular”, but can mean so much more – “important”, “distinctive”46, “consequential”, “essential”, “significant”, “crucial”. This is indeed the kind of programming the Canadian broadcasting system should provide, but if it is to do so in a Canadian form and through a Canadian lens, CBC/SRC must be put in a position to allow it to play a much larger role.

100. For us, the already false distinction as to whether CBC English Television should provide ‘popular’ programming or programming that ‘would not otherwise be there’, becomes increasingly more false going forward. CBC must provide, first and foremost, ‘compelling’ programming. Sometimes it will be highly popular, sometimes more distinctive or niche. What it must be is predominantly Canadian. In providing a compelling Canadian programming alternative, CBC’s distinctiveness will stand out more and more going forward.

101. The sheer volume of issues being addressed at this hearing will make it difficult to also conduct a full review of the future of CBC/SRC, its role in the Canadian Broadcasting system and the means by which the private elements of the Canadian Broadcasting system can support it47. However, such a review is desperately needed – and is far too important to be left to CBC/SRC management alone to undertake it.

102. Friends notes that in the 2012 networks licence renewal, we were virtually the only party to raise the likelihood of CBC losing Hockey Night in Canada. It is well past time to stop pretending that there is no fundamental choice to be made about the future of the CBC/SRC. Hence, the Commission’s failure to reference CBC/SRC in the public notice of this hearing was an unfortunate lapse, to say the least.

103. Friends encourages the CRTC to hold a hearing on the future of CBC/SRC derivative from this hearing. It should form part of a process that would lead to a report to government on the future of the broadcasting system.

104. Nevertheless, Friends believes that three core elements of the future funding of the CBC/SRC can be appropriately determined in this proceeding:

First the substantial reduction, leading possibly to an exit of CBC English Television from the commercial advertising market;

Second, the introduction of a new compensation regime by which a growing minimum (0.8%, growing to 2%) of BDU revenues are directed to the CBC/SRC; and

An OTT contribution directed to CBC/SRC.

A Less-commercial CBC English Television

105. The notion of planning a less-commercial English Television network at a time when it is already reeling from cutbacks, may seem counter-intuitive, but in Friends’ view 2014 is exactly the right time to do it.

106. With the loss of Hockey Night, the idea that the CBC English Television will retain close to half of the $260 million in annual advertising revenues it hitherto has earned is wishful thinking. Ad sales costs do not diminish proportionately. Therefore, English TV’s net revenue from advertising will soon fall into eight digits and decline further over time, at least in parallel with the decline in revenues for conventional television.48

107. While still significant, the net benefit of ads on CBC Television is not sufficient to justify continuing to skew the programming directions of the national public broadcaster.49

108. While removing, or greatly reducing CBC English Television’s presence in the advertising market would not be the boon to private broadcasters it once was envisaged to have been, it would still contribute positively to their bottom lines. In contrast, a financially-desperate CBC, driving down ad rates, is the last thing the private players need!

109. Even if these funds were not replaced, substantially reducing advertising on CBC English Television would still be worth doing, as the single boldest stroke in creating a more distinctive and valued national public broadcaster. But, as we argue in the next section, these funds can be replaced.

110. Finally, this proposition is consistent with comments made to the then Canadian Association of Broadcasters by the Prime Minister (then Leader of the Opposition) ten years ago: “We would seek to reduce the CBC’s dependence on advertising revenue and its competition with the private sector for these valuable dollars, especially for non-sports programming. This refocused CBC will, obviously, have to be provided with stable and long-term public funding.”50

BDU Compensation Regime in Favour of CBC/SRC

111. Whether considered a trade-off for CBC getting out of advertising or not, the notion of a dedicated contribution from BDUs and other distributers to CBC has considerable merit. Friends is not the only party to have raised this notion. Barry Kiefl, President of Canadian Media Research Inc. (CMRI), has suggested a “TV Distributor Tax”51.

112. Current CBC President Hubert Lacroix has also floated the idea of an incremental BDU contribution52.

113. Today, CBC/SRC benefits indirectly from BDU contributions through its ability to access the CMF for licence fee top-ups. This results in tens of millions flowing to CBC/SRC annually, as a crucial element in the Corporation’s ability to air drama. That contribution, of course, is at the discretion of the CMF. CBC/SRC once had guaranteed CMF funding; but today, there is no such guarantee. The ‘popularity’ criterion the CMF uses to allocate funds to productions licensed to private broadcasters is not appropriate when it comes to supporting “distinctive” programming on the CBC/SRC. Hence a separate envelope is needed.

114. A contribution of 1% of BDU revenues (cable and DTH) would amount to just under $90 million. If CBC Television were to move substantially out of advertising, the net result would be a wash, if not a slight plus, for vertically-integrated players. And while BDU revenues will not increase as much as they have historically, this would be a far more predictable bet for CBC/SRC than conventional advertising.

115. Such a contribution would not, by any stretch of the imagination, solve the Corporation’s financial challenges. But it would be a step in the right direction, and within the Commission’s jurisdiction, pending a full review by Government on the future of the CBC/SRC.

9. Conclusions

116. Local TV stations across the land, especially in smaller markets, will shut down and investment in Canadian programs will plummet if the CRTC adopts the rule changes it has broached in its review of TV policy Notice.

117. The Environmental Scan commissioned by Friends and others concludes that, by the year 2020, the Commission’s proposed changes, if implemented in full, would result in the loss of 31,460 jobs worth $2.9 billion to the Canadian economy every year, including the loss of $1.6 billion annually and 13,440 jobs in the broadcasting and production industries.

118. Independent stations in Canada’s smallest markets, such as Kamloops, Medicine Hat, Lloydminster, Thunder Bay, and Rivière-du-Loup would likely close, and even Bell Media’s CTV2 network of stations in London, Ottawa, Barrie, and Victoria would be at risk. Independent specialty services would close, or be gobbled up at bargain-basement prices, and even those owned by major groups would suffer material revenue losses.

119. This would constitute a body blow to Canadian local and dramatic programming, and be at odds with the objectives of the Broadcasting Act –which the CRTC is required to uphold.

120. There is a better way.

121. The Commission should recognize that there is no immediate risk to the health of the broadcasting system, and that any regulatory framework that arises from this proceeding could, at best, have a sunset of three, possibly five years. This proceeding may usefully put in place some new measures for the longer term, but it should not remove obligations based on speculation that they might become unsustainable three to five years hence.

122. Friends urges the CRTC to largely maintain the current regulatory framework, but with the following few key additions, that recognize the need to rebalance obligations in the system.

123. First, the Commission should reduce eligible community channel contributions to 1% of cable BDU revenues53, and redirect the remaining 1% to CBC for local programming (with up to 0.2% of this going to independent small market local TV stations), an amount equal to approximately $64 million annually.

124. Second, DTH should be required to match revised cable obligations towards “local expression” by directing a full 1% of revenues to local programming54. This would amount to an incremental $15 million.

125. Third, Friends recommends that a minimum 10% of Canadian revenue contribution requirement be imposed on OTT services operating in Canada. This could be directed to a combination of Canadian programming expenditures and third parties such as the CMF and CBC/SRC. Friends recommends that a minimum of 5% of OTT revenues be directed to the CBC/SRC, exclusively for programs of national interest (PNI).

126. The percentage itself could be evaluated over time, and adjusted as appropriate, taking into account the competitive environment. On projected Netflix revenues alone, the proposed 5% to third parties could yield $25 million annually by the end of 2015.

127. Together, these three measures would yield an incremental $100 million annually to CBC as early as end 2015, and grow to $150 million by 2020. Each lies within the Commission’s jurisdiction.

128. While seemingly counter intuitive with the CBC/SRC’s current financial crisis, Friends recommends that with such a reliable revenue infusion, CBC English Television get (at least substantially) out of the ad business, as a first and necessary bold step toward its reinvention by developing a truly distinctive offering, akin to Radio-Canada Television.

129. Finally, Friends recommends that, following this proceeding, the CRTC:

Commence a review of the New Media Exemption Order. As is evidenced by the Environmental Scan, the notion that new media (including OTT) are merely complementary and do not pose a threat to traditional broadcasting licensees' ability to meet their obligations, is no longer tenable. As a result, Friends submits that the CRTC is legally obliged to revisit the New Media Exemption Order and determine what contributions pursuant to the Broadcasting Act would be appropriate for OTT services and other internet-based TV players; and

Start a separate process to prepare a report to government, under the CRTC’s own initiative, on the ‘future of TV’. Such a report would update the Commission’s 2006 report, and make appropriate recommendations. In that vein, Friends urges the Commission to ask government to:

Provide the CBC/SRC with predictable and sustainable funding sufficient to carry out its statutory mandate as the national public broadcaster; and

1 An OTT service (or app) is one that provides television programming over the Internet and bypasses traditional TV distributers. Such services are generally, if not always, lower in cost than cable or satellite. In Canada, Netflix is a primary example of an OTT service. Cable and satellite distributers are also called broadcasting distribution undertakings or BDUs.

2 While labeled a “review of the evolving communications environment, and its impact on the existing and future structure of the Canadian broadcasting system” this process focused almost exclusively on distribution issues. Public Notice CRTC 1993-74.

3 Building On Success - A Policy Framework For Canadian Television. This, despite the title, dealt exclusively with private conventional TV. Public Notice CRTC 1999-97.

4 The framework for the migration of analog specialty services to digital distribution. Broadcasting Public Notice CRTC 2006-23

6 Friends participated in the commissioning of two third-party studies by Peter H. Miller. The State of the Canadian Program Rights Market: 2014, appended as Appendix 2, and TV Environmental Scan: 2014, appended as Appendix 3.

7 This combines jobs in broadcasting (18,300), those in broadcast distribution (25,100) and those in independent television production (22,900). (2011 statistics). Source: The Economic Contribution of the Film and Television Sector in Canada, Nordicity, July, 2013, commissioned by CMPA and MPA-C..

8Ibid. (Also as at 2011.) The complete value chain of film and TV production through exhibition and distribution (including, for example, media manufacturing and digital rights management (DRM) on-line and physical sales) was included in this analysis. Approximately half of this economic value is accounted for through spin-off benefits, including indirect economic impact (that associated with the sector’s procurement from other sectors of the Canadian economy) and induced economic impact (the wider impact on the Canadian economy that arises from the re-spending of labour income earned at both the direct and indirect stages).

18 CRTC data no longer appear to be publicly available. Extrapolating from available TVB data, conventional TV advertising revenue would have been approximately $2.1 billion and specialty $400 million for a total of $2.5 billion. Subscription revenues would have brought the specialty total to about $1 billion.

19 Based on 2013 CRTC Statistical Summaries. The equivalent 2012 number is identified in the 2013 Monitoring report, Section 4.1, as $15.21 million., all this at a time of low inflation.

25 It is notable that the U.S. enforces these intellectual property rights with a heavy hand, simply “blacking out” any out-of-market signal for which the broadcaster has not paid local rights, and this is unlikely to change any time soon.

26> http://www.friends.ca/news-item/11861

27 2012 figures from the 2013 CRTC Monitoring Report. Aggregate broadcasting system revenues can be expected to rise for a few more years before any decline.

31 For example, there are 18 references to the word “local” in the Commission’s Phase I Talk TV report, dealing with such matters as the importance of local reflection, and the quality and availability of local news.

32 The dichotomy between people who value the traditional local TV programming model, vs. those who seek their local news and information elsewhere is also reflected in quotes cited in the Phase I Talk TV report: “I believe that local television is a valuable resource because it presents information about our community and encourages the community’s growth” vs. “I don’t watch local programming. Not interested in community TV. I get my local news from the paper, online or from the radio.” Similar extremes are found in the Phase II Choicebook report. http://www.crtc.gc.ca/eng/publications/reports/rp140424d.htm#h3.

33 Any reduction in funding should come from the cable-controlled community channels rather than from independent community channels.

34Op.cit. Nanos Research.

35 By viewing, in particular. For example, 96% of viewing to news is Canadian; 72% of sports. CRTC 2013 Monitoring Report.

36 Every station, in a multi-station operation (conventional and discretionary), takes a share of fixed costs – overhead, shared programming etc. Thus even a station that ‘loses money’, may be worth continuing to operate because of its share of fixed costs. There is also the concept of ‘loss-leader’: a station may lose money, but still have a sufficient promotional and market benefit for shared programming (NHL, for example) and corporate branding (e.g. Rogers or Bell) to be worth continuing to operate.

37 Category A services were licensed with the expectation that they would make a more significant contribution to Canadian exhibition and CPE than Category B services. Along with a Cat A licence comes a requirement that BDUs ‘offer’ them to customers (as opposed to ‘must carry’). Now, the Commission appears to be suggesting eliminating Cat A designation while providing Cat C licensees with essentially 9(1)(h) (must-carry) status. In Friends’ view, mandatory carriage for Sun News cannot be reconciled with enhanced consumer protection.

38 Friends would not support reducing funds to independent community television operators. Instead Friends recommends that their funding should be enhanced. Note Public-Community Partnerships to Improve Local Media in Canada, by Karen Wirsig (CMG) and Catherine Edwards (CACTUS), December, 2012.

39 This would be incremental to the current 0.4% directed to the small-market Local Programming Fund.

42Netflix Price In Canada Just Went Up By $1, The Huffington Post Canada, Michael Bolen, 05/09/2014.

43 This could be as simple as allowing vertically-integrated ISPs to exempt viewing of their Canadian OTT services from bandwidth caps. By virtue of undue preference rules, this would have to be extended to other Canadian broadcasters.

44 Other public, public interest and educational broadcasters can also play an important role, although by no means as an effective replacement or alternative to a strong national public broadcaster.

45 The fact that such programming does not currently have pride of place on CBC’s English Television service is partly a failure of imagination on the part of CBC/SRC management, and partly the result of over-reliance on commercial revenue, which militates against such choices. Friends has commissioned research, which will shortly be available, demonstrating what a true English Television public-service broadcasting schedule for 21st century Canada could and should look like, and we will seek the Commission’s permission to share this research at the September Public Hearing.

46 As referenced above, Friends defines ‘distinctive’ Canadian programming as programming that is ‘culturally Canadian’ (i.e., that tells uniquely and recognizably Canadian stories and/or casts a uniquely Canadian lens on the world), rather than merely ‘industrially Canadian’ (i.e., shot in Canada, using some arbitrary proportion of Canadian resources.

47 Friends notes that the 1998 TV policy review (culminating in Public Notice CRTC 1999-97), which in many ways most closely resembles this one, was specifically restricted to private broadcasting.

48 Friends contends that, with respect to the issue of advertising on CBC English Television, nothing material has changed since its submission in October, 2012 during the Commission’s Public Hearing on CBC/SRC’s networks licence renewals, other than a recent softening of the television advertising market, which reinforces the thrust of our policy recommendations. Regarding the drop to ‘eight digits’, see paragraphs 59-64 of that submission.

49 Friends’ October, 2012, CBC submission to the CRTC demonstrated that contrary to the arguments advanced by others (including CBC management), this skewing effect is real, and is recognized, and deplored, by many viewers (paragraphs 44-52). This factor has also been recognized and discussed extensively by the Commission in the past.

52 At a town hall meeting called to discuss plans for job cuts and changes in the wake of CBC’s loss of Hockey Night in Canada, Mr. Lacroix is reported to have said: “Imagine if in Canada the BDUs decided to give us three or four or five percent of whatever bottom line number and they committed to that over years, maybe that could be something,” Cable bill hike to pay for CBC?, Brian Lilley, Toronto Sun, April 14, 2014.

53 This should include mandatory contributions to not-for-profit community channels.

54 The 1% would include the current 0.4% directed to the small-market local programming fund.